The Federal Reserve has increased interest rates by 75 basis points, as projected by JP Morgan chief Marko Kolanovic. Although the hike is less than the speculated increase of 1 percentage point Michael van de Poppe projected, the US lending rates are now at a 15-year high. The cost of borrowing from the apex bank ranges between 3% and 3.25%.
Following the unanimous decision, the US Stock markets have come tumbling down, and all gains eroded. The Crypto market, meanwhile, is in the red, but the losses are not as steep.
Investors Will Lose In The Meantime
The monetary policy aims to rein in the galloping inflation that Americans are grappling with. It is, therefore, a win for low-income households who may get a reprieve at gas pumps and grocery stores. However, crypto holders and investors of financial instruments will incur short-term losses.
On the stock market front, NASDAQ, S&P500, and the Dow Jones indexes have shed off 1.45%, 1.75%, and 1.73%, respectively.
The Crypto market capitalization has plummeted to $908 billion from $936 billion following the decision. Indicators show that the bear run could prolong until next year as investor confidence in the economy wanes.
It’s A Buyer’s Market
Bitcoin is trading below $19,000 for the first time since the 7th of November, 2022. From midday yesterday, BTC plunged from a high of $19,626 to $18,293. Activities in the Asian market have reversed the losses, and the sharp decline is easing.
The volume of transactions for BTC is estimated at $49 million in the last 24 hours. Hence, it is evident that investors are interested in Cryptocurrency, and the price will organically rise.
Ethereum is trading at $1,265.07 after plummeting by 20% in the last week. The hype around the Ethereum merge is fizzling out and no longer boosting ETH adoption as hodlers await the hard fork. However, the Ethereum blockchain remains the most popular sandbox. The mainnet is accelerating digital transitioning.
ETH market dominance has since plummeted to 17.1% from a peak of 20% at the beginning of the month. The market capitalization is $155 billion.
Cardano, Solana, and Doge are also bearish; indicators show signs of recovery. Ripple is bullish after gaining 22% in the last week. Following the interest rate hike, XRP gained 0.47%. It seems like Crypto is heading to regain its position as the second largest Digital Asset.
2022 Will be a Turbulent Year for Financial Markets
Analysts project that the Federal Reserve may hike the rates up to 4.4% by next year. The tightening monetary policy will continue adversely impacting the markets. 2022 is hence the year for buying the dip as low prices prevail.
Stablecoins, Non-Fungible Tokens (NFTs), and Central Bank Digital Currencies (CBDCs) are less volatile and ideal for risk-averse Crypto enthusiasts.